Can Federal Legislation Stop the Foreclosure Tide?

It’s a huge cause for concern: The number of housing foreclosures across the United States continues to go up. According to RealtyTrac (www.realtytrac.com), a national provider of foreclosed properties, one in every 171 U.S. households received a foreclosure notice in the second quarter of this year. That’s an increase of 121 percent compared to the same quarter one year earlier. This is unacceptable. And the fact that foreclosures continue to go up should worry everyone: Foreclosures can devastate an entire neighborhood. With the country suffering through severe economic doldrums, a wave of additional foreclosures is the last thing we need.

Fortunately, last week members of the U.S. House of Representatives finally approved legislation that would provide financial assistance to U.S. homeowners facing foreclosure. This "bailout" for many suffering homeowners is called the Foreclosure Prevention Act of 2008.

The legislation’s main goal is to prevent more than 400,000 U.S. homeowners from losing their residences to foreclosure. It does this by allowing them to refinance their current mortgage loans into lower-cost government-insured mortgages. Additionally, it provides protection for builders who are rehabilitating units used primarily for residential purposes, encourages businesses and developers to use "greener" methods of construction and consumption (through tools like tax incentives), and provides $850 million annually for public transportation infrastructure.

Is the measure enough to slow the number of foreclosures? That’s impossible to predict. But I am happy that the government has done something. A healthy housing market is crucial to a strong U.S. economy. Anything the government can do to help boost the housing market is not only appropriate, it’s essential.